In line with the Bank of Canada's forecast, the economy rebounded sharply in the third quarter following the weak performance in Q2. Stats Canada announced this morning that GDP grew by a whopping 5.4% in Q3 following the downwardly revised 3.2% earlier in Q2. As pandemic restrictions phased out and businesses resumed normal operations, consumer spending accelerated, growing at a 17.9% annual rate. Expenditures on clothing (+26.8%) and footwear (+30.3%) surpassed pre-pandemic spending. Expenditures on services rose 27.8%, led by a jump in accommodation and food services sales. Transport services (+40.3%), recreation and culture services (+26.1%), food, beverages and accommodation services (+29.0%), and personal grooming services (+35.8%) all showed significant increases.
Exports rebounded after a sharp decline in Q2. Business investment barely changed, hampered by supply chain disruptions.
Consumers remained flush with cash as incomes grew, boosted by wage gains and government transfer payments. The household saving rate fell from 14.0% in the second quarter to 11.0% in the third quarter, still strong from a historical perspective. Although spending surpassed income this quarter, this was the sixth consecutive quarter with a double-digit savings rate. The rate also remained higher than in the pre-pandemic period. The household savings rate is aggregated across all income brackets. In general, savings rates rise with income. |
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